Abhishek Chauhan
Online food delivery is a game-changer in the global food industry. According to recent projections, the industry is expected to hit the $200 billion mark soon. A major component of this rising trend is cloud kitchens. Also known as virtual, ghost, or dark kitchens, these facilities are different from the traditional brick and mortar, dine-in restaurants.
Source: Forbes
Overview of cloud kitchens
Long before the emergence of the COVID-19 pandemic, demographic, and technological changes informed the idea of online food delivery. Demographic factors such as the increasing number of nuclear families and the growing number of working women created a growing demand for an on-call food delivery format.
Similarly, technological changes like smartphone applications and the availability of websites made it easy for consumers to order for food items in the comfort of their homes, offices, or wherever they wanted. Coupled with reliable delivery and integrated digital payments, more consumers are realigning their purchasing decisions with this trend.
At the height of COVID-19 lockdowns, traditional restaurants shut their doors. This gave rise to an opportunity for cloud kitchens to take over. With a raging pandemic in our midst, the future of the dine-in industry remains uncertain. This even gives more power to the online food delivery format. But first:
What is a cloud kitchen?
The terms are often misunderstood, but a cloud, virtual, dark, or ghost kitchen is different from the traditional sit-down restaurant. Cloud kitchens focus only on takeaways. They offer no dine-in facility and customers have to use a mobile app or website to order food.
While there can be multiple types of cloud kitchens, with some even having small physical outlets, they must be backed by a base kitchen or a group of cloud kitchens. If you’re looking to venture into the cloud kitchen business, it’s important to know that it’s just like any other business—with its share of benefits and pitfalls.
The positives of cloud kitchens
Low operation cost
Unlike traditional restaurants that demand a premium location, space, labor, and infrastructure, cloud kitchens are based in low-premium locations that do not require high rental. This eventually reduces operation costs by half.
Even with a modest budget, you can still run a cloud kitchen and serve a good number of customers to their satisfaction. What matters is whether you have what they want and can deliver it when and where they want it.
Low risk
Since they require a low initial capital outlay to launch, cloud kitchens are good for startups. Virtual kitchens are mainly an ideal venture for smaller enterprises such as food trucks, home-based cooks, and even those who are interested in the food business but have little or no prior experience.
Upcoming entrepreneurs who would like to venture into the restaurant business but are concerned about high expansion budgets can also explore the industry.
Competitive pricing
In addition to lower operation costs, cloud kitchens can offer more competitive pricing to their customers. Since they don’t have to invest in massive infrastructure, space, and other areas that brick and mortar restaurants would have to do, virtual kitchens have a window to offer more reasonable menus in terms of pricing. They can also improve their customer base by focusing on the quality of their food and delivery services.
Cheaper advertising
Virtual kitchens are pure, online-based businesses. This makes it easy to utilize social media to advertise their services. Compared to other means of advertising, social media stands out as a cheaper option. With smart strategies, cloud kitchen owners can reach their core audiences easily.
Besides, virtual kitchen owners can utilize SMS and e-mail marketing services. These are equally cheaper compared to billboards or TV adverts and can help them reduce their expenses.
A growing market
Since cloud kitchen is a relatively new idea, many people would like to buy it and venture into the business. According to projections by a Swiss investment and financial services company UBS, most meals will be ordered online by 2030.
This implies that the delivery market is in a growth phase, courtesy of the time-strapped millennial generation. Rapidly evolving technologies such as mobile app ordering, cloud kitchens, and drone deliveries are key components of this growth.
Source: UBS
The downsides of virtual kitchens
Only available online
Cloud kitchens are only visible online. This limits customer interaction and virtual kitchens could find it difficult to establish their brands at first. They have a huge challenge of reaching out to potential clients and commanding loyalty, particularly from the older generation.
While the Millennials and Generation Z are digital-first generations and easier to approach, cloud kitchens need to be smart enough to adopt innovative strategies and win a loyal, broader customer base.
Technology dependent
Virtual kitchen business is entirely dependent on technology. As innovations continue to come up in various fields including AI, Voice Assistants, AR and VR, mobile applications and more, both businesses and customers are set to benefit from the industry. However, technology has its share of challenges, which might halt basic operations of cloud kitchens.
Final Thoughts
The COVID-19 pandemic has indeed altered the world in many ways and the food delivery sector is not left behind. As the world continues to grapple with the pandemic, cloud kitchens are better positioned to be the future of food delivery.
Like any other business, cloud kitchens have their challenges as well. However, it’s even more important to remain aware of the challenges and identify creative strategies to deal with them. Overall, online food delivery is set to play a major role in the future of restaurants and this could be the right time to jump in.
